Written by 
Edited by 
Retirement doesn’t have one universal definition or one required age. You might retire when you stop working full time, become financially independent or begin collecting income from Social Security, a pension or your savings. Government programs use specific ages for benefits, but those milestones do not necessarily determine when you have to leave the workforce. Defining what retirement means to you can help you estimate how much income you’ll need and build a plan around the lifestyle you want.
If you don’t know where to start with planning for retirement, consider working with a financial advisor who can help you build a strategy around your retirement goals.
How the Government Defines Retirement
Social Security may be one of several income sources you’re planning to tap into retirement. But Social Security does not establish an age when you must stop working. Instead, it sets different ages that affect when you can claim retirement benefits and how much you receive. The earliest you can generally begin Social Security retirement benefits is age 62, although claiming before full retirement age permanently reduces the monthly amount.
To get your full benefit amount, you’d need to wait until reaching what the Social Security Administration calls your full or normal retirement age. Full retirement age is 66 for people born from 1943 through 1954 and rises gradually for later birth years. For anyone born in 1960 or later, FRA is 67. Waiting beyond FRA can increase your retirement benefit through delayed retirement credits, with those increases stopping at age 70.
Other government retirement-related programs use different ages. Medicare eligibility, for example, generally begins at age 65, even though Social Security FRA may be 67. Retirement-account rules can use still other age thresholds. That means there is no single federal “retirement age” that determines when someone must leave work. These ages affect benefits and financial planning, while the decision about when to actually retire depends on your finances, health, career and personal goals.
Retirement Ages at a Glance
Retirement rules use several different ages for Social Security, Medicare and retirement accounts. These milestones can affect when you qualify for benefits, when you can access savings without an additional tax and when certain withdrawals become mandatory.
| Age | Retirement Milestone | Why It Matters |
|---|---|---|
| 55 | Potential exception to the 10% additional tax | If you leave an employer in or after the year you turn 55, distributions from that employer’s qualifying retirement plan may avoid the 10% additional tax on early distributions. This exception generally does not apply to IRAs. |
| 59 ½ | Retirement withdrawals generally avoid the 10% additional tax | Distributions from IRAs and qualified retirement plans generally are no longer subject to the additional 10% early-distribution tax, although income taxes may still apply. |
| 62 | Earliest Social Security retirement age | You can generally begin Social Security retirement benefits at 62, but claiming before full retirement age permanently reduces your monthly benefit. |
| 65 | Medicare eligibility generally begins | Most people first become eligible for Medicare around age 65. Medicare eligibility is separate from Social Security full retirement age. |
| 67 | Social Security full retirement age for people born in 1960 or later | Claiming at FRA generally allows you to receive 100% of your primary insurance amount before any applicable adjustments. |
| 70 | Delayed Social Security credits stop | Social Security retirement benefits can increase for each month you delay after FRA, but delayed retirement credits stop accumulating at age 70. |
| 73 or 75 | Required minimum distributions can begin | RMDs generally begin at age 73 under current rules. The applicable age increases to 75 for people who reach the later age under the SECURE 2.0 timetable. |
These ages do not tell you when you have to retire. Someone might stop working at 60, begin Medicare at 65, claim Social Security at 70 and start required minimum distributions years later. Your retirement date can therefore be separate from the ages that govern individual benefits and retirement-account rules.
How to Create Your Own Definition of Retirement
The dictionary defines retirement as no longer being part of the workforce and living off of savings and investments. It’s generally a time when you spend more time pursuing leisure activities.
But Linda Leitz, Certified Financial Planner™ (CFP®) and certified member of the Alliance of Comprehensive Planners, says it’s important to define retirement from your own perspective and values. It should center on living a life that’s meaningful to you. These tips can help you create your custom retirement plan:
1. Define Your Version of Retirement
The first step in creating a definition for retirement is identifying how you want to spend your newly available time. You may want to travel the world, explore new hobbies or even use your skills to work part-time or start a side hustle.
Next, you should consider when you’ll retire. The FIRE movement – Financial Independence / Retire Early – promotes retiring well ahead of the normal retirement age, but you might want to delay retirement and stay in the workforce longer.
2. Estimate What Your Retirement Will Cost
Once you’ve thought about what your retirement will involve and when you hope it will begin, you can estimate how much savings you’ll need to make it a reality. If you’re pursuing a non-traditional retirement like starting a business or living on a cruise ship, your retirement budget may look a little different than others.
Once you’ve estimated your budget, compare the estimated outgoing expenses to your estimated income in retirement. That includes Social Security benefits, pensions, 401(k) withdrawals, IRA withdrawals, cash savings and CD earnings, along with any inheritances you may receive and annuities you purchase.
3. Evaluate Your Current Progress
Your retirement budget and income estimate can help you assess whether you’re doing enough today to reach the retirement you hope to have down the line. Take a hard, honest look at your savings and investment accounts as they stand today. Does it seem like you need to bump up your 401(k) contributions or adjust your portfolio allocation?
As with saving in general, you’ll be better off the earlier you evaluate. Even if you are wary to check on your retirement savings because it seems lacking, the best thing you can do is start working toward a solution that bulks them up as needed.
4. Create a Contingency Plan
Life doesn’t always go according to plan. While you may have a set definition of what retirement means, there’s no guarantee that you’ll be able to pull it off perfectly. For example, you could develop a serious health issue that significantly increases your monthly spending or you may need to provide financial support to one of your relatives.
A contingency plan can include an emergency reserve, adequate insurance and flexibility in your retirement spending. The appropriate amount of cash to keep available will depend on factors such as your regular expenses, guaranteed income, healthcare coverage and investment risk. Keeping enough liquid savings to avoid selling investments unexpectedly during an emergency can be useful, but holding substantially more cash than you need can also limit the amount available for longer-term growth.
5. Talk to a Professional
The key to successfully defining retirement is to make it as personalized as possible. And connecting with a professional financial advisor can help you do just that.
“The best way to create your own plan for financial independence is to work with an advisor who doesn’t assume your financial decisions will be based solely on some standard set of metrics,” Leitz says. “Work with an advisor who will listen to what’s important to you and sees your money as a way to fulfill your life goals.”
Bottom Line
Retirement doesn’t begin at one universal age. Social Security retirement benefits can generally start at 62, Medicare eligibility usually begins at 65 and full Social Security retirement age is 67 for people born in 1960 or later. Those are important planning milestones, but none necessarily determines when you have to stop working. Your own definition of retirement may mean leaving the workforce completely, reducing your hours or becoming financially independent enough to choose whether you work. Defining the lifestyle you want, estimating its cost and comparing that with your expected income and savings can help you determine when retirement is financially realistic.
Tips for Planning Your Retirement
- Finding the right financial advisor to help plan your retirement doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Once you lock in an advisor, take time to go through your retirement definition. You’ll want to discuss how much you need to save, whether your goals are realistic and how to reach them. Tax planning and the possibility of long-term care should also be part of the discussion to ensure that your financial plan for the future is sound.
Photo credit: ©iStock.com/kate_sept2004, ©iStock.com/DragonImages, ©iStock.com/artisteer